Financial services have played a significant role in service provision to individuals and businesses as well as the state. Firstly, individuals have benefitted a lot from the services offered by well-known investment companies in Oman such as Dhofar International Development $ Investment Holding Company, Oman Investment Fund (OIF), And Takamul Investment Company among others. These companies act as an intermediary between commercial banks and people thus providing individuals with financial support (Abimanyu 2016). Secondly, individuals benefit by buying securities, being offered a fair capital exchange for equities shares and advice especially to individual investors on how to meet financial challenges.
Additionally, the investment companies offer cash management to individuals who may be experiencing a financial crisis. Oman Investment Fund (OIF) has been working closely with citizens in the management of funds as well as offering guidance on cash management on a personal level. Unlike commercial banks, investment banks do not accumulate deposits from individual investors thus enhancing their financial capabilities. Moreover, the investment companies help individuals to meet their investment goals through managing their assets such as real estates or small businesses and offering them cheap bonds and stocks to raise funds quickly (Arouri and Fouquau 2009).
Companies also benefit mainly from investment companies. Investment companies act as an advisor to a wide range of firms in Oman. Corporations have challenges in deciding how to raise capital and mostly seek help from key players in the investment industry. Usually, if a company faces unfavorable investing climate, an investment firm advice on the need to sell an ownership stake in the company through a bond issue or stock offering. This is done by analyzing earnings potential, interest rates and strength of management team of a specific company (Behar and Fouejieu 2016). Secondly, investment firms offer advice in merger scenarios. For instance, they advise a business on the financial worth of the company they plan to purchase and how to proceed with the dealer to benefit them.
Takamul Investment Company is known for working with several companies in restructuring their transactions to meet specific short and long-term objectives. Examples of services they offer especially to upcoming firms include assisting them to reduce their debt load, financing critical projects, and expanding existing operations (Braimoh 2017). Concerning sales and trading, they help the firms by marketing their stock through publishing research reports concerning the market and industry at large. Lastly, they are vital to companies when they require business valuations, financial restructuring, strategic planning, and other organizational opinions.
Other than individuals and companies, the investment firms are also decisive for the government. They have been mainly offering financial advisories to Oman government concerning ways of raising money. Specifically, they advise on the sale of treasury bonds to the public to raise funds that will circulate in the economy. Secondly, through taxation analysts, they advise the government on effective taxation methods to maintain their economy. Over several years, Oman government has been working closely with Dhofar International Development $ Investment Holding Company in devising ways that make it possible for the government to allocate resources with better risk-return features (Dudian, Mosora and Birova 2017).
Another crucial service they offer concerns project advisory service. Oman government have numerous projects that require massive financing and should be viable in the economy. To efficiently carry out the plans, the government seeks the services of investment firms professionals who analyze all the risks involved in the process (Hakro and Omezzine 2016). In turn, the government proceeds or cancels a perceived project according to their directions. Corporate finance advisory is also offered to governmental bodies to reduce costs and enhance efficient utilization of public resources. Lastly, the government seeks the services of investment companies when analyzing financial costs of merging various departments or ministries to be effective.
Effects of Oil Price Changes on Oman Central Banks Operations and Its Clients
The banking sector is highly sensitive and exposed to oil price fluctuations. Operations at Omans Central Bank have always been affected by changing oil prices in Oman recently because they are driven by oil price booms and oil-related cash entering their financial system. The boom-bust oil cycles significantly affect the bank profitability because Omans banks depend on oil businesses. Firstly, oil prices changes increase oil-related lending which in turn results to excess liquidity in the banking system. High liquidity leads to weakening domestic currency compared to foreign currencies thus paralyzing banks operations (Husain et al. 2015).
Secondly, oil price changes affect the banks growth of net deposits and income. This slowdown is likely to scale down major operations being carried out by Oman Central Bank. More importantly, the Central Banks balance sheets will be affected in case of falling oil prices because of possible loss of loans being made to oil companies in Oman. Being a key bank in the country, financial challenges may cripple their funding of significant projects in the nation thus affecting the economy (Masan 2016). Moreover, the credit losses are expected to affect the banks asset quality thus causing internal challenges touching on asset base.
Furthermore, oil price changes greatly affect their clients which is, in this case, the government and small banks in Oman. With the current tumbling of crude oil prices in the Middle East, the energy sector is experiencing a decline in profits and subsequent reduction in public spending. The government is forced to seek assistance from the Central Bank to fund government operations of deteriorating revenue from oil sales (Sommer et al. 2016). Additionally, low oil income forces the Central Bank to allocate fewer funds to the national treasury and thus the implementation of government policies will be hit and may ultimately hut the entire countrys economy.
Small banks are other parties that will be affected by fluctuating oil prices. One of the major role of the Oman Central Bank is supplying and distributing money to small banks that are accessed by numerous clients. The banks face tightened liquidity and subsequent reduction of bank deposits and increasing non-performing loans (NPLs). The banks fail to provide financial support to their clients or may be forced to increase loan rates to cushion their profitability and chances of bad debts (Theobald and Hohlfeld 2017). Lastly, small banks may be forced to close their operations especially those who majorly depend on the oil industry.
Abimanyu, Y., 2016. Oil Price, Government Revenue, Export Value, and Economic Growth: Indonesias Case. Kajian Ekonomi dan Keuangan, 20(3), pp.213-230.
Arouri, M.E.H. and Fouquau, J., 2009. On the short-term influence of oil price changes on stock markets in GCC countries: linear and nonlinear analyses. arXiv preprint arXiv:0905.3870.
Behar, M.A. and Fouejieu, M.A., 2016. External Adjustment in Oil Exporters: The Role of Fiscal Policy and the Exchange Rate. International Monetary Fund.
Braimoh, L.A., 2017. Leadership Strategies for Maintaining Profitability in a Volatile Crude Oil Market (Doctoral dissertation, Walden University).
Dudian, M., Mosora, M., Mosora, C. and Birova, S., 2017. Oil Price and Economic Resilience. Romanias Case. Sustainability, 9(2), p.273.
Hakro, A.N. and Omezzine, A.M., 2016. Oil prices and macroeconomic dynamics of the Oman economy. The Journal of Developing Areas, 50(1), pp.1-27.
Husain, M.A.M., Arezki, M.R., Breuer, M.P., Haksar, M.V., Helbling, M.T., Medas, P.A. and Sommer, M., 2015. Global implications of lower oil prices (No. 15). International Monetary Fund.
Masan, S.S., 2016. Oil and macroeconomic policies and performance in Oman (Doctoral dissertation, (c) Saleh Said Masan).
Sommer, M.M., Auclair, M.A., Fouejieu, M.A., Lukonga, M.I., Quayyum, S., Sadeghi, A., Shbaikat, M.G., Tiffin, M.A. and Versailles, M.B., 2016. Learning to Live with Cheaper Oil: Policy Adjustment in MENA and CCA Oil-Exporting Countries. International Monetary Fund.
Theobald, T. and Hohlfeld, P., 2017. Why have the recent oil price declines not stimulated global economic growth? (No. 185-2017). IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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